Investing Master Class

Lesson 3:

Saving vs. Investing

Investing Master Class

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Overview

In this lesson we explain why saving and investing are two very powerful, but also very different tools. You'll learn how to get the most out of your savings account to achieve short-term goals. And, learn why investing is the better tool for long-term goals like reaching and enjoying your retirement.

Full transcript

What's up? Good to see you again.

What if you actually have a tidy little sum in your savings account? Should you keep it there? Or take it out and invest it? But that's risky, right?

Well, it depends on your timeline. If you're going to need your money soon, let's say for buying a house in the next year or two. Or your emergency fund. Then yes, stash that cash in a good savings account.

But if you're thinking long term about retirement, your kid's university, or buying a home further down the road 10, 20, or 30 years from now. Then definitely invest and enjoy the growth of the stock market.

Can't I keep it all in my savings account?

Even if you put a high percentage of your income into a savings account. It probably won't be enough for retirement. Unless you're billionaire Richard Branson or something. In which case,'ello Richard Branson. Thanks for stopping by.

But for the rest of us, investing some of our income is key. That's because the best savings accounts only earn around 2% interest. Whereas as the stock market, on average, has earned about 5% over savings accounts per year. You'll never get those kinds of returns stranding your money at the bank.

Okay, I want to invest. But how do I start?

Okay so bingo playing, tracksuit wearing, gray hair flipping, Future You is on board. What about right now you? Does investing mean eating out is cancelled? Vacations and shopping too? You're living like a monk now. Unless you want to work until the day you die. It's important to invest even a small amount as early as possible for retirement.

But, you might be thinking, I'm a millennial. Who graduated with a mountain of student loan debt and even breathing the latte smells wafting from the next brunch table over is expensive. There's no way I could save 10% of my income for retirement.

We hear you. We don't want to shame anyone. We just want Future You to be able to kick back some day and chill. And drink all those lattes.

Start small if you need to

Start with a small percentage of your income and gradually increase the percentage over time. Even if you begin with just 1% of your income, and grow it over time. You'll end up in a much better place than doing nothing at all.

None of that sounds too painful, does it? Surely not when you're becoming a bigger financial genius with every episode.